The Federal Reserve Bank of New York's Liberty Street blog recently posted an analysis that compares Millennials' participation in the housing and auto loan market in 2013 with findings from the previous year.
The result? While the real estate market has begun to recover, at least relative to the Great Recession, people in their 20s and 30s with student loans are continuing their retreat from the housing market noticed in the 2012 study. This age group as a whole is returning to autos, but those with student loans continue to hang back.
"Last year, our blog presented results from the FRBNY Consumer Credit Panel (CCP) indicating that, at a time of unprecedented growth in student debt, student borrowers were collectively retreating from housing and auto markets," wrote the report's authors Meta Brown, Sydnee Caldwell and Sarah Sutherland, all of the New York Fed's Research and Statistics group. "In this post, we compare our 2012 findings to the news for 2013.
" According to the Fed, student loans now comprise 69% of the debit side of Jane or Joe Millennial's budget ledger. By the Fed's reckoning, student borrowers experienced an uptick in average total debt, from $29,872 to $30,227 in 2013.
The CoreLogic national house price index rose 11% from December 2012 to December 2013 - evidence of a substantial recovery in residential property. The Los Angeles Times reported on January 3, 2014 that 2013 "was the [auto]industry's best year since 2007." Despite a spike in overall mortgage debt, 30-somethings with or without student loans continued to retreat from the housing market.
"Prior to the most recent recession, homeownership rates were substantially higher for 30-year-olds with a history of student debt than for those without," the Fed stated. The truism was that student debt holders have higher levels of education on average and higher earning potential. These people were more likely to buy homes by age 30.
That changed with the Great Recession. "As house prices fell, home ownership rates declined for all types of borrowers, and declined most for those 30-year-olds with histories of student loan debt," the Fed stated.
"Surprisingly, student loan holders were still less likely to invest in houses than non-holders in 2013," the Fed added, "despite the marked improvements in the aggregate housing market." The Fed said that this "remains a puzzle." The housing rebound of 2013 "appears to have proceeded without the help of this skilled set of young buyers." Explanations run the gamut - limited access to credit, lowered expectations of earnings, "even a cultural shift by which young people - whether they went to college or not - are deferring home purchases."
The Fed doesn't seem to have addressed the relative benefits of an improved real estate market--not everyone gets what he wants. Aside from the influence of student loan debt, there has been a slow rise in mortgage rates. According to Bankrate.com, 30-year-fixed mortgages were at their lowest ebb last year in early May, when they averaged about 3.52%. A year later, the 30-year-fixed mortgage rateaveraged about 4.35% for the week of May 5-9, 2014. An 80-plus basis point swing can spell the difference between becoming a buyer and remaining a renter, especially for first-time buyers. While the Fed cites the increase in the CoreLogic index, rising property values mean you'll probably need a bigger down payment and a larger mortgage, especially if you don't already have equity in a home you can sell. http://www.mainstreet.com/article/real-estate/millennials-continue-retreat-now-recovering-housing-market?page=3
The bidding wars are back. While not every local real-estate market is experiencing bidding wars, some homebuyers find themselves competing for houses because not many are for sale in their markets. To compete in a bidding war, buyers need to prepare financially for the home purchase. They have to be familiar with property values in their target neighborhoods. And they must know what they want. While offering the most money might seem like the best way to win a bidding war, sellers don't always choose the highest offer. Instead, sellers often prefer offers that are most likely to go through and that meet their conditions. Here are six tips to increase your chances of making the winning offer in a bidding war for the house of your dreams.
Are you thinking of moving and worried about how your brood will take it? Here's some solid advice from the experts to make landing in a new nest as soft and gentle as possible.
First, take a deep breath and relax: "The vast majority of kids who move, especially if it's under three or four times [in their childhood], do well," Medway says. The most stressful moves for kids, Medway says, are those in which another factor complicates the situation - a family breakup or divorce, for instance, or a parent's lost job and the family's subsequent money stresses.
There's no single, telltale sign that your child might be having trouble with an upcoming or recent move, psychologists say. Instead, parents should look for sudden, unusual changes from normal behavior. "When the parent starts saying, 'My kid is not my kid,' that's when you need to investigate further," Medway says. Know how your child reacts to stress and ask yourself if that has changed, says John Helminski, a licensed psychologist in Cary, N.C. He says other possible warning signs could include:
Most Americans want to own their own home. Some even call it a biological urge, based on our human desire to nest. Whatever the current economic condition of the country, whatever the latest programs offered or atrocities committed by government and banking institutions, that desire doesn't seem to change and is unlikely to change even 25 years from now. Perhaps Thomas Jefferson put it best, "A right to property is founded in our natural wants."
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